03 Nov 2022, 13:32
Carolina Kyllmann

Timely implementation of electricity price subsidy scheme “completely unrealistic” – energy industry

Clean Energy Wire

Implementing Germany’s planned electricity and gas price brakes is “unmanageable” in the desired timeframe, energy associations have said following a cabinet meeting on the country’s relief measures against rising energy prices. The federal and state governments agreed that the so-called "power price brake" – a scheme that would subsidise a basic monthly consumption of electricity – should come into play from 1 January 2023, but the energy industry says such implementation is not realistic. “This is completely unrealistic in terms of timing,” said energy industry association (BDEW) head Kerstin Andreae. “We are talking about a complex system in which millions of consumers have to be correctly billed with a multitude of different tariff structures. Relief for the people is necessary, but it must also be implementable so that they actually receive it,” she continued. The concerns are shared by the local utility association VKU, which said that while it appreciates relief should come into effect quickly, the federal government should “keep an eye on what is technically feasible,” adding that no set of rules or ready IT solutions exist to implement the price brake. “This announcement has caused horror among those who are supposed to implement it,” said VKU head Ingbert Liebing.

The German government has agreed on the final details in financing for the gas and electricity price brakes, and a one-off payment for households business gas consumers. They have also agreed on a 49-euro national public transport ticket and windfall taxes for electricity producers. Through the price brake schemes, gas prices will be capped at 12 cents per kWh and electricity prices at 40 ct/kWh for a basic monthly consumption consumption beyond that would come at regular market prices. This will be implemented alongside other regulations such as the retroactive skimming of windfall profits from electricity producers from September 2022, and one-off payment with which the state will largely pay households’ and small businesses' December gas and heating bills. Price comparison website CHECK24 calculated that the planned relief proposals will save electricity consumers between 96 euros (annual consumption of 1,500 kWh) and 320 euros (annual consumption of 5,000 kWh). Gas consumers would save between 264 euros (consumption: 5,000 kWh) and 1,056 euros (consumption: 20,000 kWh), according to the company’s calculations. A report by climate research institute MCC found that a gas one-off payment and a price brake would bring “substantial relief” to private households, but is still “socially unbalanced”. 

Rising energy prices and their effects on households and businesses have become the greatest concern for German voters, recent surveys have shown. Their rapid increase, fuelled by Russia’s invasion of Ukraine, has been spurring inflation more broadly. While early on the focus had been on high prices for gas and oil, electricity prices in Europe have also become heavily affected by the knock-on effects of the gas market.

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